The SPAC: the new favorite outlet for beauty brands?
Other SPACs in the areas of beauty, wellness and lifestyle were heralded by serial entrepreneur Katherine Power, who formed Powered Brands with Dana Settle of Greycroft. Power also founded and runs skincare line Versed and beauty brand Merit.
Why SPAC is attracting interest
Historically, selling to companies like L’Oreal or Estée Lauder has been much more popular than an IPO. That’s partly because of the “incredibly high” sums companies are willing to pay, says Lauren Leibrandt, head of beauty and wellness investment banking at Baird. “Typically it would be a mid- to high-single digit or even low double-digit revenue multiple, which is a very robust valuation.”
Beyond price, Leibrandt said brand owners have traditionally been drawn to finding a home for their brands within a conglomerate, given the natural synergies and potential for future growth through infrastructure. of the acquiring company.
The IPO process, on the other hand, is cumbersome and difficult. Many companies, spanning all industry sectors, struggle with the complexity and intensity of the process.
SPACs offer a faster route. While not new, SPACs have garnered interest in 2020 from consumer brands, as retail and institutional investors seek other ways to capitalize on the rapid growth of many brands. “Since the start of the pandemic, consumer savings rates have risen dramatically as people were unable to spend on things like travel and entertainment,” notes David Silverman, the agency’s senior director. of Fitch Ratings. “There are now more consumer dollars to invest, and more platforms and services that will facilitate such investment.”
Beauty businesses enjoy a level of personal connection with their customers that is not shared by other types of consumer goods, due to the intimate and sensory nature of applying cosmetics and skincare. skin, notes Waldencast’s Brousset.
An optimal SPAC acquisition could reflect the benefits of selling to a larger player in the beauty industry. Men’s grooming company Manscaped was acquired by a SPAC, Bright Lights Acquisition Corp, a move that helped connect the brand with marketing-important celebrities. “We were at a healthy point where there were plenty of fundraising avenues open to us, but we weren’t able to connect with virtually anyone in Hollywood, and we thought that would be incredibly valuable to increase media effectiveness,” said Paul Tran, Founder. and CEO.